With the Liberal Democrats, we thought long and hard about how to tackle this issue before we came to Report. We chose to table Amendment No. 13, which I shall come to later today. This amendment is designed to keep the parliamentary spotlight focused on dormant account schemes, and it specifically refers to reuniting schemes including those where wills are involved. It is designed to respond to the concerns that the noble Baroness raised. We felt that if the banks dragged their feet it would be possible for the parliamentary spotlight to be put on those unsatisfactory arrangements. The Government, whose powers of persuasion are capable of being very powerful in those situations, would then have a target to go for. It is not always necessary to have reserve powers. If there is a voluntary scheme which is not working, the Governmentcertainly under pressure from Parliamentcould help to make it work better.

The noble Baronesss amendment refers to,

the establishment of a register of dormant accounts.

It is my understanding that the charities want to search for accounts long before they have become dormant. An account does not become dormant under this Bill until at least 15 years has passed, possibly longer. The charities want access to accounts earlier. That is what I understand the banks and building societies are going to deliver. We want to focus on what they are going to deliver, and on ensuring that that works well. I also gulped a bit at the sweeping powers being given to the Secretary of State by the noble Baronesss arrangement. We often criticise the Government when they seek to take such powers. We are trying to achieve the same things as the noble Baroness but without the heavy hand of an unrestricted power. We believe in giving voluntarism, which underpins this Bill, a chance to work. For those reasons, we cannot support the noble Baronesss amendment.

Baroness Pitkeathley: My Lords, the issue to bear in mind here is that of giving a voluntary scheme the chance to work. I again declare an interest as a member of the Commission on Unclaimed Assets. Discussions with banks and building societies showed that they were extremely reluctant at the beginning to come into a schemeand in some cases even to admit the existence of these assets. That is why it has remained a voluntary scheme.

I have two points to make. First, I want to pay credit to the charitable sector for all that it has done in bringing this issue into the public arena. It is entirely through the efforts of some individuals in the charitable sector that we are discussing this Bill at all,

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or even are aware of the existence of large amounts of unclaimed assets. That is very praiseworthy indeed.

Secondly, we should remember how the money is going to be distributed. If, as I hope, some of the moneyperhaps quite a large amountis going to go to the wholesaler, who will distribute that money further? Again, the focus is on making the capacity of the third sector greater than it currently is. We should not assume that if we do not pass this amendment the charitable sector will be forgottenon the contrary.

Lord Bach: My Lords, I echo what my noble friend Lady Pitkeathley said. All of us who support this Bill owe a great deal of thanks to the Unclaimed Assets Charity Coalition and to charities in general for having pushed this point so that it in effect became an election manifesto promise and then found itself going through your Lordships House.

4.15 pm

I also pay tribute to the noble Baroness, Lady Finlay of Llandaff, who moved the amendment. I am not going to accept it on behalf of the Government, and I will try to explain why. I shall deal first with the point about the central register. It is an important point but not as important as her point about whether this is a voluntary or perhaps eventually compulsory scheme. She pointed out that there had already been some discussion about the central register in the brief time that we have already spent on Report.

We have concerns. We welcome the constructive suggestions as to how the industrys reuniting arrangements might be further improved, but a central register would be expensive and would place a large and unnecessary administrative burden on the scheme. More importantly, perhaps, there are concerns that financial institutions respect the confidentiality of the information that they hold about their customers. We would genuinely have to look carefully at the human rights implications of any power to issue regulations that in effect required banks to breach that confidentiality. Reuniting is important, however, and we welcome the banks and the building societies commitment to a major reunification exercise in the run-up to this scheme becoming operational. In particular, we welcome the BBA, the BSA and the NS&I proposals for a single one-stop shop for reuniting, and their commitment to help hard-to-reach, disadvantaged customers. These proposals will allow people to be reunited with their lost money, and should, we hope and believe, make a register unnecessary.

Participation in the scheme will be voluntary for individual banks and building societies. This has rightly been a focus of our debates. I say rightly because I would be the first to accept on behalf of the Government that these proposals are innovative. The unclaimed assets scheme will not be like other mandatory schemes in countries such as Ireland, which the noble Baroness mentioned, or even the United States. Our approach is based on clear and firm commitments on the part of the sector to participate in a voluntary scheme and to make it a success. We welcome those commitments, which are one of the reasons why we believe that we can implement a voluntary scheme with some confidence.

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I draw noble Lords attention again to the public commitments set out in the joint foreword to the Treasurys consultation document on the scheme last year, which was jointly signed by the BBA and the BSA. I also draw the Houses attention to the press notice that the industry released on 8 November 2007, which confirmed its continuing commitment to the scheme and illustrated that commitment to the major banking groups that have participated in discussions with the Government to date. Banking groups are fully committed to the scheme, and it is estimated that they represent about 90 per cent of all retail and savings balances held by those institutions in the UK. This is an illustration of the level of support that we believe we have for the scheme.

If a voluntary scheme can be a success, it is not necessary to consider a compulsory scheme now or in the future. There are advantages to a voluntary scheme, and downsides to a compulsory one. A voluntary approach brings some flexibility; I hope that we agree on that. Our legislation provides a minimum definition of dormancy, but will allow individual institutions to refer to a range of indicators that suit their own capabilities and customer needs best in order to determine whether an account is genuinely dormant. This means that not all accounts that technically meet the legal definition of dormancy must be transferred, and enables only genuinely unclaimed accounts to be transferred into the scheme. As a result, the UK scheme will be less rigid than many other international schemes. It has been based on existing industry systems, helping to reduce what can easily run out of hand and add unnecessary administrative costs. It can also be kept up to date, in line with the latest technology. A voluntary scheme allows us to take account of better regulation principles, ensuring a low regulatory burden on business and helping to maximise the money available for reinvestment in the community. I see some noble Lords in the Chamber who are, like me, lucky enough to be involved in another Bill going through Committee, so I hope that this argument rings some bells with them. We believe that if there is an opportunity to maximise money for good causes with the sectors support, we should clearly take it. Let us be frank: a voluntary approach enables the use of private-sector expertise to manage liabilities to account holders. It is right that the private sector, which has the expertise to manage reclaim risk, should take on that function. As I have said, the sector is committed.

I will look more carefully at the arguments put forward by some noble Lords that banks and building societies might renege on the commitments that they have entered into. We expect institutions to join the scheme in order to play a positive role in reuniting customers with their assets and making money available for community reinvestment. We believe that prestige is likely to be attached to participation, and we do not accept that the industrys profits really provide incentives not to participate in the scheme. The banking industry estimates that dormant accounts in the UK account for only 0.047 to 0.065 per cent of the totals in retail banking and savings balances held by the nine largest banking groups alone. The industry itself rejects the argument that retaining this money on its balance sheets is a

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disincentive to participationnot, I repeat, a significant motivation for them. Yet, when we consider its potential to be used for good causes, we see that it is a significant amount to us and to the charities that the noble Baroness, Lady Finlay, so proudly praisesand rightly so.

Of course, the scheme must be highly transparent, to demonstrate that the banks and building societies are delivering on their commitments, to maintain public confidence in the scheme and to strengthen further the incentives for institutions both to reunite customers with their own money and to transfer genuinely dormant accounts to the scheme. Later, we will discuss the disclosure requirements in the Bill, which will result in details being published about which institutions are participating in the scheme, how they will participate and the value of assets transferred into the scheme and of those reunited with account holders.

We hear sympathetically what the noble Baroness says; indeed, we understand some of the scepticism. Yet our view is that those arguments run counter to the public commitments of the industry, the many advantages of a voluntary scheme and the positive incentives for institutions to participate.

I shall deal briefly with the reasons why a compulsory scheme is not the best option. In the light of the sectors ongoing support, we see no reason to take a reserve power to establish one. We may not agree again all afternoon, but on this occasion I agree with the noble Baroness, Lady Noakes, that the reserve power that the amendment would give to a Secretary of State is very great. We have fundamental concerns about the appropriateness of such a power, as a compulsory scheme would look completely different to a voluntary one. It would not be able to rely on the industrys willingness to establish a reclaim fund. In effect, the Bill would have to establish that fund as a public body and set out in detail an enforcement mechanism so that it was clear which sanctions would apply to institutions that failed to comply with the scheme. That would have to be monitored and regulated. I could go on, but the point is that a compulsory scheme would require extensive further legislation. I am sure that your Lordships will be delighted to hear that we do not believe that it would be appropriate to deal with such extensive legislation in secondary legislation. Fundamentally, it is not our intention to take substantial reserve powers that we do not believe to be necessary.

In short, we have a lot of confidence in the scheme; let us see whether we are proved right. We do not expect our voluntary scheme to fail. We do not want to take unnecessary powers. We believe that extensive primary legislation would be required to introduce a compulsory scheme.

We have every sympathy for the charities; they do a magnificent job, which is accepted around the House without exception. We do not believe that on this occasion they are right. We believe that we should give this voluntary scheme a chance to succeed, so we ask the noble Baroness to withdraw her amendment.

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Baroness Finlay of Llandaff: My Lords, I am grateful to the Minister for his detailed reply and to noble Lords for their comments. I and others have concerns about sweeping powers. I agree with the noble Baroness, Lady Noakes, that one is always cautious about giving any Minister of any Government more powers than are needed. There is a principle about the voluntary sector working with a voluntary schemeone hopes that it works well and for the benefit of everyone.

I am also grateful to the noble Baroness, Lady Pitkeathley, for her intervention, particularly for her reminder that the charitable sector has not been forgotten. I say to the House that neither will the charitable sector forget: it will be watching this legislation like a hawk. It needs to know that, everyone having worked so hard to get this far, the legislation really will work.

I understand the criticisms of my amendmentperhaps the powers were a bit too sweepingbut I emphasise the fact that voluntary schemes cannot have people reneging on them. A huge amount of money is at stake for the charities. It might be a small amount for the banks, but, as the Minister said, it is a large amount for the charities. I will watch with great interest the amendment tabled by the noble Baroness, Lady Noakes. If it helps to solve the problem, it will have done a great service to the charitable sector. We will have that important debate later today.

With those reservations and understanding the criticisms, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 [Transfer of balances to charities, with proportion to reclaim fund]:

Lord Shutt of Greetland moved Amendment No. 5:

Clause 2, page 2, line 4, leave out smaller bank or building society and insert building society or a smaller bank

The noble Lord said: My Lords, the ultimate purposes of this Bill are, first, that in general money for good causes as defined, with separate provisions for Wales, Scotland and Northern Ireland, ends up being disbursed by the Big Lottery Fund. The second purposethe alternative schemeis to assist charities that are local to where the banks or building societies are based. Banks and building societies are able to avail themselves of the alternative scheme if they have an asset base of less than £7,000 million.

In Committee, I endeavoured to put the view that the £7,000 million was a cliff edge and that there should be some apportionment for all banks and building societies. All of them have a local or regional element, whatever their size. I am not clear how many banks in the scheme as envisaged would fit the smaller scheme. However, as the building societies publish figures, we know that the smaller scheme applies to 51 of the 59 societies. I have received no message from any bank, and I find it sad that the banks shrug their shoulders, so to speak, and say, Well fit in with this. So be it.

That is not the case with the building societies. The eight largest building societiesthe big eightdo not wish to be volunteers for the general scheme. Indeed, they have written to us. We are told that this is a voluntary scheme but the building societies do not

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wish to volunteer. Why is that? Building societies all have a clear local or regional element. Perhaps the Nationwide, the biggest of them all, is the only one that really is, as its title suggests, nationwide. Seven of the eight biggest building societies have clearly defined charitable foundations that they themselves have set up and into which they put millions each year. Those foundations have independent trustees. All eight see clearly that charitable giving is an expression of their mutuality.

4.30 pm

It is invidious to treat the building society movement on this 51:8 basis. It is right to treat them all in the same way. The Bill says that the £7,000 million can be changed by order. That could be needed quite soon. Take building society number nine, the Derbyshire. At its last account date in 2006, its asset base had exceeded £6,000 million. Unless an order is placed in the next couple of years, it will, as it were, be added to the big eight.

We do not know much about Northern Rock, although much has been said here and in the other place. We saw the queues. I suspect that many of those people making withdrawals from Northern Rock went around the corner and placed their funds in a building society. We do not yet knowwe will not know for a month or twowhat effect that will have on the balance-sheet values of all the building societies. There could well be a quantum leap in all building societies at the 2007 balance-sheet dates.

It occurs to me that mergers are not totally unknown. In 1900, there were 2,286 building societies; by 1950, there were 819; 20 years ago, there were 131; and, 10 years ago, there were 71. Now, there are 59. I do not believe that anybody has decreed that there should be no more mergers. It would be wrong for this Bill somehow to get in the way of what building societies naturally wish to do. I am suggesting neither that there should be further mergers, nor that there should not be further mergers. If, for reasons of their own, which might have something to do with cash machines or computers, the societies believed that there should be a merger, it would be very strange if, under this Bill, that merger meant that, in future, dormant accounts had to join the general scheme, rather than the two local schemes.

Decision-making in those building societiessub-contracted, in the cases of seven of the big eight, to those trusts that they have set upinvolves several people. Often, the societies involve their membership in deciding how, with their mutuality, they give away what they feel is right to society and the communities that they represent. I contrast that with the decision-making that may be there when we come to the Big Lottery Fund and its board.

It is right to free all building societies from being part of that general fund and to let what has certainly been built up locally be used in a local way. It is often used in this way at present, but this would firmly enhance it. I beg to move.

Lord Naseby: My Lords, I have been involved in the mutual movement for probably the whole of my adult life, so I think that I understand that movement

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and its ethos. A person who joins a building society, a friendly society or a credit union does so specifically as against joining a commercial bank. That is because, as they all understand, those bodies that I have just mentioned are mutual, there are no shareholders, and the operational surplus achievedand all of them achieve itis shared among the membership. That is very different to a commercial banking arrangement. I fear that the Government have never really full understood that fact.

With a dormant building society account, members who opened that account originally made a conscious decision to put their money in a mutual society. They could have gone the other way but they did not. So they and their successors in life, who have somehow or other got lost, would want to see their money being used on the same principles for which it was originally invested and used by the charities set up by that particular building society. That is not a party-political thing at all. Certainly, given the choice between the building societies own charitieswhich all have independent trustees and are geared to what the society is interested in, by way of helping a community or the environment or whateverand the Big Lottery, I do not believe that a single member of a building society would vote for the Big Lottery. Very few would vote for the lottery as a whole, although that would be a little better.

The Big Lottery, like it or not, does not have the image today that people in the mutual world trust. I am sorry to be so blatant, but you have only to look at some of the projects that the Big Lottery has got into and the image that it has. It may be unfair but it is a fact that the image that it portrays is one of being an extension of government, excessively PC and not really understanding the local environment in which the building societies operate. In addition, cost efficiency is a criterion. This is money brought forward from a dormant situation. The existing charities, controlled by the charity commissioners, are very cost effective. While I do not have the detailed figures of the Big Lottery, I suspect that if I went into it I would find that the Big Lotterys costs are far higher than any of the cost bases for their charities.

The building societies are already regulated by the charity commissioners and they have their own auditors. I chaired a friendly society for eight years, which had a charity. At the AGM, probably our most actively discussed area was what our funds were being used for within the charity. I commend the Government for bringing forward this voluntary scheme, but they need to recognise that this minority sector, which it is, has a different outlook and the money would be better used in the existing charitable framework that is there than if it is put into the vast pot of the Big Lottery. That is why I support the noble Lords amendment.

Baroness Noakes: My Lords, as I said in Grand Committee, we are sympathetic to the desire of large building societies to build on their existing charitable foundations, which support the communities in which they operate. These amendments affect only eight building societies, as the noble Lord, Lord Shutt,

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explained, although because of their relative size within the building society movement they would probably account for the vast majority of the £150 million or so that is estimated to come from dormant building society accounts.

I can see that the Government fear losing control over a large tranche of dormant account money, which, if this provision were fully implemented, will escape the clutches of the Big Lottery Fund. We do not see that as a disadvantage, so we will support the Liberal Democrats if the Government do not accept the amendment of the noble Lord, Lord Shutt.

Lord Davies of Oldham: My Lords, I am grateful to all noble Lords who have spoken in the debate. The noble Lord, Lord Shutt, has reiterated, with great consistency and with considerable force, the points he made on the Bill at Second Reading and again in Committee. I guess that I am obliged to recognise that I am not making much impression on him with my responses.